Public Bill Committee

[Mr. Christopher Chope in the Chair]

Written evidence to be reported to the House

CM 4 Association of Personal Injury Lawyers
CM 5 Memorandum (Name and address supplied)

Christopher Chope: I understand that it is the wish of the Committee, agreed through the usual channels, that this afternoon’s sitting should take place between 5 and around 6.45 pm. I have made that announcement so that members of the public are aware of it, and also for members of the Committee who were not privy to the earlier discussions.

Clause 15

Repeal of sections 6 and 46

Andrew Selous: I beg to move amendment No. 18, in clause 15, page 7, line 10, at beginning insert—
‘(1) Subject to subsection (2),’.

Christopher Chope: With this it will be convenient to discuss the following amendments: No. 19, in clause 15, page 7, line 10, after ‘(c. 48)’, insert ‘shall’.
No. 20, in clause 15, page 7, line 18, at end insert—
‘(2) When applying section 57 of this Act the Secretary of State shall only bring the provisions of subsection (1) into force on such day as he by regulations amends the provisions set out in subsection (3) below, so as significantly to increase the amount of child maintenance which is to be disregarded when calculating income other than earnings for income support or jobseeker’s allowance purposes.
(3) The provisions referred to in subsection (2) above are—
(a) paragraph 73 of Schedule 9 to the Income Support (General) 1987 Regulations;
(b) paragraph 70 of Schedule 7 of the Jobseeker’s Allowance Regulations 1996.’.
No. 45, in clause 15, page 7, line 18, at end insert—
‘(2) Subsection (1) shall not have effect until the Secretary of State has, by regulations, amended the provisions set out in subsection (3) below so as significantly to increase the amount of child maintenance which is to be disregarded when calculating income other than earnings for the purposes of income support or jobseeker’s allowance.
(3) The provisions referred to in subsection (2) above are—
(a) paragraph 73 of Schedule 9 to the Income Support (General) 1987 Regulations;
(b) paragraph 70 of Schedule 7 to the Jobseeker’s Allowance Regulations 1996.’.

Andrew Selous: I welcome you back to the chairmanship of our Committee after the long summer break, Mr. Chope. I am sure that the Ministers have had the same joy as Opposition Members in getting back to speed on our earlier discussions. I am sure that we will all get back into the swing of our deliberations, which proceeded in a focused and constructive manner in previous sittings. The hon. Member for Rochdale will, no doubt, discuss amendment No. 45 in due course.
The clause makes a major change to the current system of child support by repealing sections 6 and 46 of the Child Support Act 1991. Section 6 requires those in receipt of benefit to lodge an application for child maintenance with the Child Support Agency, which is, in broad terms, a reform that the official Opposition support. It will provide equality of treatment to all sections of the population and will not force one section to go down a route that they might not want to go down. However, as with any change of this nature, that inevitably raises a number of other questions, which I hope will provoke a debate and a response from the Minister.
It is worth putting on the record a few facts relating to the abolition of section 6. At the moment, only 31 per cent. of parents with care who are on benefit received child maintenance in the previous three months. That comes from the CSA’s quarterly statistics of March 2007, table 13.1. Therefore, the requirement in section 6 is not working, as 69 per cent. of parents with care who are on benefit are not receiving child maintenance to start with. Two thirds of the cases that are taken on because a parent with care has claimed benefit never reach the stage of an initial calculation and payment set-up. That information is also from the CSA’s quarterly statistics of March 2007, table 2.2. We also know, as was explained by the Minister’s colleague Lord McKenzie in our evidence-taking session, that many parents with care also withdraw before a calculation has been made, because they go off benefit, so we understand and are broadly sympathetic to what the Government are doing.

Tim Boswell: Does my hon. Friend agree that another important motive in the initiation of that structure was saving public funds by recovery from the parent without care? Can he advise the Committee, or hazard a guess, as to the amount of public money that ought to be recoverable and is not or, conversely, the amount that is scored in benefit and that is either reclaimed against individuals or is not eventually recovered from the parent without care?

Andrew Selous: I am glad that my hon. Friend has raised that point, and he is absolutely right to do so. It is worth putting on the record that the change is major, because one of the original objectives was to ensure that the public purse did not lose out—he will have sat through those earlier debates with my hon. Friend the Member for North-East Bedfordshire (Alistair Burt) and others who were Ministers at that time. We have to say that that intention has had a chequered history, as some of the statistics that I have read out have shown. That point is worth making, so that we are all conscious of the change that we are bringing about.
Above all, we need to focus on a system that works and that gets money to parents who are looking after children. We must ensure that there is a focus on lifting those children out of poverty and on ensuring that they have the income to which they are entitled. My hon. Friend the Member for Daventry—indeed, the whole Committee—could regale you for some time with endless statistics about how things have gone wrong in the past, but you would not allow it, Mr. Chope. There is agreement on that issue, which is why the Government have introduced the legislation. However, my hon. Friend has made an important point and I am grateful to him for putting it on the record.
The Child Maintenance and Enforcement Commission will be able to focus on applications from parents who actively want to use its services, which should make a difference. It will not be plain sailing, because there is often severe antagonism between the parents, and there may be recalcitrant non-resident parents who do not want to pay. Part of the challenge for the Bill, and for the changed culture that we hope will go with it, is whether there will be a change of heart as far as those non-resident parents are concerned.
Section 6 of the 1991 Act provided a mechanism to bring parents with care who are on benefit into the child maintenance system. There is a worry that there may be parents with care who will not pursue a voluntary arrangement when, perhaps, they should. My hon. Friends and I have tabled an amendment that will allow us to debate that very point later. However, there is an issue about the decision to delay the introduction of a higher maintenance disregard until 2010. With the Bill likely to gain Royal Assent and come into effect next year, there is a worry that there will be problems between the later implementation of the maintenance disregard and the Bill coming into effect. That is a timing issue, and it is possible that the number of lone parents on benefit seeking maintenance will decrease, because the current £10 disregard is not a great incentive as far as they are concerned.
I do not know when the Government will announce the level of disregard for child maintenance income, but I hope that it will be sooner rather than later—I understand that discussions are ongoing with the Treasury and others on that point. Projections have been made about higher levels of disregard, the number of children that would be lifted out of poverty and the cost that would result from a higher level of disregard. One Parent Families and other groups maintain that this is a cost-effective means of lifting children out of child poverty. However, we also need to look across the piece to see what the effect will be as far as parents are concerned, and I will say more about that later. A full maintenance disregard would cost about £230 million. According to some analyses, that would be cost-effective in terms of lifting children out of poverty, compared with an increase in tax credits, for example.
On the notification by Jobcentre Plus of the current £10 disregard, Jobcentre Plus must notify the agency, which must then split the maintenance payments made by non-resident parents, so that only £10 goes to the parent with care and the rest is diverted to the Secretary of State. When the parent with care goes back into work, Jobcentre Plus must notify the agency again to redivert all child maintenance to them. Those are some of the practical problems that amendments Nos. 18, 19 and 20 seek to address.
Empirical evidence from the United States, which can be found in the Department’s own research report No. 402 of 2007, shows that increasing the level of the disregard has not had an adverse effect on the employment rate. I would be grateful if the Minister would comment on that and let us know when we are likely to have that key information, which is critical to the future successful transfer of child maintenance, because, in a sense, we are discussing this part of the Bill with a big hole in front of us. I will be interested to hear the Minister’s response to this debate.

Paul Rowen: I, too, welcome you back, Mr. Chope, after what has been an unusual break. Some of us did not know whether we would be completing this process today.
I want to discuss amendments Nos. 18, 19 and 45. We are considering the repeal or abolition of sections 6 and 46 of the 1991 Child Support Act. Although that move might be welcome, we have tabled the amendments, because we are concerned that the it may have some adverse effects, as has been mentioned by the hon. Member for South-West Bedfordshire, and not necessarily be of overall benefit. We are also concerned about the delay announced by the Government to the point at which an increased child maintenance disregard can come into place.
The abolition of child poverty is something that all three political parties can sign up to. I shall quote the Prime Minister in July 2004:
“the great and unacceptable concentration of poverty amongst households with young children—is the greatest indictment of our country in this generation and the greatest challenge of all.”
That sums up what we all perceive to be an important target. If the Government are to meet their 2010 target of halving child poverty, child maintenance and its payment has a part to play. We are concerned that the £10 disregard, which will be introduced next year, will only affect some 47,000 parents. We know already from this year that the number of children in poverty has grown. We also know, as has been mentioned, that only 31 per cent. of parents with care on benefit have received child maintenance. If section 6 is abolished without the increased child maintenance disregard, the number of children who receive child maintenance will fall. The figure of £10 that has been quoted may be the maximum amount paid by the non-resident parent.
We must accept that section 6 has not been good value in terms of the amount of money recouped. Last year, £110 million was recouped, yet the administrative costs of the agency were around £425 million. Section 6 has not been successful in its original purpose, and it has acted as a disincentive for the formation of voluntary arrangements. That point was acknowledged in the Government White Paper:
“reclaiming most of the money for the State, rather than passing it through to children, still means that neither parent has a strong enough incentive to co-operate. This undermines the extent to which child maintenance can contribute to the eradication of child poverty.”
That is a key point. If we are serious about eradicating child poverty, we must use the child maintenance system as a tool.
Consider the comparison between the tax credits system and the child maintenance system. If the Government were, for example, to introduce a total higher maintenance disregard, it would cost in the region of £230 million. That is what we would like to see, and I know that the Chancellor has received a letter requesting that he announces such a change in today’s pre-Budget statement. Using the child maintenance system, it costs £2,875 to lift a child out of poverty. Using the tax credits system, however, the cost to the taxpayer is £4,300. Whichever way one looks at it, if the Government are serious about eradicating child poverty and meeting their 2010 target, they should consider the rapid introduction of the full maintenance disregard.

Tim Boswell: Will the hon. Gentleman take this as a genuine comment? Is he not concerned with the equity of the position of somebody who is in receipt of full benefits and who also receives child maintenance—albeit perhaps an inadequate amount—compared with somebody who simply receives benefits and who does not have the advantage of the receipt of child maintenance? The needs of the child are the same in each family, but the resources, whether public or private, are very different, and the result in terms of poverty is also likely to be very different.

Paul Rowen: I understand the hon. Gentleman’s point. At the moment, the system is a barrier for parents who are going through the process, because of the hassle involved. My concern is that if one sticks at the £10 disregard, or if it is increased to £30 or whatever, that will be the amount that the non-resident parent agrees to pay. That will not help to deal with the issue of child poverty.

Andrew Selous: Although I agree with what the hon. Member for Rochdale has said, everyone needs to take my hon. Friend’s warning note on board. It is the case that poverty in two-parent families has increased. It has gone up from 57 per cent. in 2002-03 to 60 per cent. in 2005-06, according to the households below average income figures for 2005-06. That does not run counter to anything that my hon. Friend and I have said. My hon. Friend’s warning must be heeded, if we are to be fair to everyone and to ensure that we lift all children out of poverty.

Paul Rowen: I understand the hon. Gentleman’s point. The problem is that although we are dealing with child maintenance, this amendment seeks to do something for one group of parents.
Save the Children gave me some interesting figures yesterday, which are apposite to the hon. Gentleman’s point. I am sure that members of the Committee have seen the briefing from Save the Children on the elimination of child poverty. If we carry on at the current rate, it will be 2049 before the Government meet their target of halving child poverty. That is because the disparity in income has grown between people at the top and at the bottom, and there is therefore a disparity in the time that it will take for parents to reach 60 per cent. of median income, which the norm to which we aspire. It is frightening to consider the year 2049, when we have a target of halving child poverty by 2010. Given that the costs are £200 million, we must ask ourselves—I hope that the Minister can answer this—what the real barriers are to introducing the full disregard more quickly than is proposed at the moment.
I accept the point made by the hon. Member for Daventry that we must consider the issues not only for single parents but across the piece. Given that this measure would cost £200 million and would have a dramatic effect in reducing child poverty for a significant number of single parents, why are the Government being so slow to introduce it? Also, will the Government accept the concern that if section 6 of the 1991 Act is abolished without full income disregard, the effect may well be that fewer parents, and therefore fewer children, will receive child maintenance? We all want an increase, not a reduction, in the number of parents receiving child maintenance.
I hope that the Minister will explain why we have to wait until 2010. We may have to wait only until this afternoon, when the Chancellor will give his pre-Budget statement. I hope that the Minister can answer those points.

James Plaskitt: It is nice to be back, Mr. Chope. I am sure that we will continue our deliberations in the same constructive way as before the recess, and it is nice to know that we will be able to conclude them.
I thank the hon. Members for their amendments and comments. I am grateful that the important reform at the centre of our proposals has been welcomed by both hon. Members who have spoken. The reform is a major change, and it is very important.
Our aim is to encourage parents to make arrangements for maintenance on their own, if they can, while maintaining a statutory maintenance service for those who cannot. To achieve that, we propose to repeal sections 6 and 46, making the removal of compulsion the first step in moving to a new system of child maintenance.
Hon. Members have referred to the Government “delaying” the implementation of the larger disregard. That implies that a clear option was open to us immediately to go to the higher disregard level and that a decision has been made to put it off. That is not the case. It is not a matter of delay; it is a matter of doing all the necessary preliminary work to ensure that the higher disregard levels can be introduced.
What has to be done? First, there is research, which neither the hon. Member for South-West Bedfordshire nor the hon. Member for Rochdale mentioned. We must carefully consider the interaction between higher disregards and work incentives. If the objective is to reduce child poverty, as both hon. Members have said and as I agree, we must take that factor into account. If we were not certain of the impact of the changes in terms of work incentives, and we subsequently found that the change encouraged more people to stay on benefit and not to seek work, we might not be serving the objective of reducing child poverty. It is therefore important thoroughly to assess all the impacts.
There is existing research, and the hon. Member for South-West Bedfordshire has mentioned the United States. That is not exactly the same system, so we cannot necessarily assume a simple transference from the American experience to here. We have commissioned some research of our own specifically to consider the circumstances pertaining to the UK. The research is very close to conclusion, and we hope to publish it very shortly. We must think carefully before making decisions on the implementation of the higher disregard.

Paul Rowen: My understanding is that DWP research shows that the vast majority of lone parents want to work. A 10-year study of British lone parents and their children from 1991 to 2001 found that, controlling for other factors—in other words, aside from matters such as education and occupation—receipt of child maintenance is positively associated with parents moving into work, and not the opposite. There should be no need for any more evidence, because the existing research shows that worklessness and being a lone parent are not related. Lone parents are just as willing and eager to work as other parents.

James Plaskitt: The hon. Gentleman is right in the sense that so far the analysis is encouraging. I hope that he agrees that it is crucial to be sure that we have this absolutely right, so that the reform, as we introduce it, serves our common objective of reducing child poverty. I also want to stress that that is not the only aspect of disregard reform. Other changes, such as the extension of the £10 disregard, will be introduced more quickly. There will inevitably be sequencing to ensure that the systems work and that the reform achieves our objectives.

Tim Boswell: We are having a consensual discussion. Does the Minister agree that the research should take into account the relative equity between persons who are, or should be, in receipt of child maintenance on the one hand, and persons who may well be in other parts of the benefits system but who are not affected by child maintenance issues?

James Plaskitt: That is being looked at as part of our research, as the hon. Gentleman will see when it is published. We will encourage parents to arrange child maintenance alongside the repeal of section 6, whether through making their own arrangements or through applying to the statutory maintenance service for a calculation. As part of this, as we discussed before the recess, CMEC will introduce a high-quality information and support service. It will draw in low-income families and support them to make an informed choice about which maintenance option suits their circumstances best. In addition, we have already announced our intention to extend the existing £10 disregard to all cases on the original scheme by the end of next year. Around 80,000 children already benefit from the disregard. The extension will extend that benefit to a further 55,000, which is quite a significant step in terms of tackling child poverty.
We have made clear our intention to increase significantly the maintenance disregard for all parents with care from 2010-11, which will deliver on our twin objectives of reducing child poverty and supporting parental responsibility. However, we also recognise that this is a complex issue, where many potential impacts need to be considered. We need to ensure that we achieve the right balance between the incentive to seek and pay child maintenance, and the incentive to move into work. Securing that balance will provide the real child poverty gains that we all seek to achieve. It is critical to get that right. Continuing to overturn satisfactory arrangements or forcing parents to justify why an application should not be made and imposing benefit penalties on the most vulnerable parents are not appropriate.
We will encourage parents to make maintenance arrangements as soon as possible, and we should not make the timing conditional on the significant increase in the benefit disregard. There is enough in the new system from the outset, in the extended disregard and the new information and support service, to encourage positive parental choice. We will build on that with the significantly higher disregard to ensure the longer-term success of the new system. I hope that for those reasons the amendment will be withdrawn.

Andrew Selous: I have listened with interest to the Minister’s response. I want to leave on the record my concern that I am not sure that he addressed the issue of equity between families on benefits who are not in receipt of maintenance and those who are in receipt of maintenance. He said that the research was looking at that, but I again have to express disappointment that it is not before the Committee. It seems slightly the wrong way round to have the research commissioned while the Committee is sitting, so that we are conducting our deliberations without the benefit of research that the Government are conducting. As I said, we are also ignorant of what the proposed significant increase in the level of the disregard will be, but having heard what the Minister has said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Michael Weir: I beg to move amendment No. 90, in clause 15, page 7, line 18, at end add—
‘(c) section 4(10)(aa).’.

Christopher Chope: With this it will be convenient to discuss amendment No. 125, in clause 15, page 7, line 18, at end add—
‘(2) In section 4 of the Child Support Act 1991 (Child support and maintenance), for subsection (10) substitute—
“No application may be made at any time under this section with respect to a qualifying child or any qualifying children if there is in force a maintenance order in respect of that child or those children and the person who is, at that time, the non-resident parent.”.’.

Michael Weir: It seems like “Groundhog Day” because we are discussing matters that I have been raising ever since the re-design of the Child Support Agency was first mooted. This is perhaps the last throw of dice to try to persuade Ministers to look at the matter anew.
The introduction of voluntary maintenance agreements has been widely welcomed. It provides the possibility of removing many people from the statutory system and creating agreements that are acceptable and which work well—something that the current CSA has, frankly, failed to do. Unfortunately, section 4(10)(aa) of the 1991 Act will, I believe, act as a serious deterrent to many people who would otherwise go down the route of a voluntary agreement. I note in passing that Sir David Henshaw in his report recommended the abolition of the 12-month rule, but the Government have not gone down that route and I would be interested to hear the reason for that.
The brief history is that the original 1991 Act intended that the CSA would take over child maintenance, but that soon proved to be beyond the agency’s capabilities, and it clearly still is. Under the Child Support, Pensions and Social Security Act 2000, the Government attempted one of their many efforts to improve the agency by introducing the section that allowed couples to reach an agreement, but they set a 12-month time limit after which either party could apply to the CSA to overturn the terms of the agreement. The rationale behind that was to give the agency a breathing space during which couples could still reach an agreement, but ultimately everything would come under the auspices of the CSA.
Given that we are considering a change and, as the Minister said, we are encouraging parents to reach their own agreement, the continued existence of the rule will be a serious stumbling block to the widespread use of voluntary agreements. I am sure he will say that we cannot have an agreement that is set in stone for eternity. In essence, that is correct, but the majority of agreements will have within them a provision that allows for variations if there is a change of circumstances. That was a standard clause in my previous life as a solicitor when we entered into many such agreements prior to the CSA. We recognised that child support was a long-term matter. It is not for one year or five, but 16 or 17 years in some cases. There must be allowance for variation. I suspect that the standard agreement produced by CMEC will contain something similar to that—unless it is the Minister’s intention that the CMEC agreement be renegotiated each year, which will lead to some friction.
If voluntary agreements merely mirror the statutory agreements, and if all we have is a standard form into which the parties agree to pay statutory percentages, an important chance will be lost to allow separating parties to agree a clean break and reach agreements that reflect accurately the particulars of the specific circumstances and provide a much more solid basis for child contact to continue into the future, which is the essence of such matters.
As the Committee has discussed the matter, I have become slightly worried about whether voluntary agreements will provide a serious alternative to the statutory system. In our first evidence sitting, I raised specifically the Scottish minutes of agreement, and Hilary Reynolds, the civil servant in charge of the Bill, responded by saying:
“It is worth noting that when we have talked to some clients about what they find important in a voluntary agreement, sometimes it is not regular payments, but lump sums, mortgage or school uniform payments, or whatever. What suits the parents of the child or children will be a variety of things, not just the standard x amount per period.—[Official Report, Child Maintenance and Other Payments Public Bill Committee, 17 July 2007; c. 29.]
I agree with that statement, but I do not believe that it would be possible under the proposals. If such an agreement were entered into by parties, CMEC can intervene after the year has passed and overturn it.

Tim Boswell: The hon. Gentleman makes a powerful case, to which the Minister should at least give an answer. In his experience of the current formulas, does he agree that a great deal of the concern that is expressed by parents relates to agreements about particular payments that are not taken into account in a formula and might therefore be said to have left a lasting sense of unfairness?

Michael Weir: The hon. Gentleman is correct. We have all met people in our surgeries who are paying for x and y and who have said to the agency, “Look, I have done this”, but the agency will not take it into account. To be fair, sometimes there is little evidence of what people have been doing because the parties have handled things in cash. I appreciate that that is a problem, but it leaves a sense of bitterness in many relationships and poisons them after the break-up.
A serious problem arose in respect of the Child Support Agency in that it would in effect look only at the regular payments made by the non-resident parent to the parent with care, irrespective of whatever arrangements may have been agreed. In many cases, parties had entered into a minute of agreement that might, for example, have transferred a large capital sum or the whole matrimonial home to the parent with care in exchange for a reduction in payments or instead of regular payments. That may well have allowed the clean break, especially when new relationships were being formed or other children were involved, which is often the crucial point because the new relationship can start to break down because of the pressures and payments in the old relationship. Many of those agreements were overturned subsequently and the CSA pursued the non-resident parent for increased child maintenance irrespective of what had gone before. That was unfair and led to great tension between couples.
If the 12-month rule continues, what is the point of entering into an agreement other than of the standard variety? In our evidence sitting, Lord McKenzie said:
“The one key change will be that, once the section 6 compulsion goes, a claim for benefits by one or other of the participants will not break the agreement. It will continue, subject to the 12-month rule, under which either party can elect to come out of the agreement.”——[Official Report, Child Maintenance and Other Payments Public Bill Committee, 17 July 2007; c. 5.]
In other words, a party to an agreement cannot be sure that it will last for more than 12 months. The Minister assured the Committee that
“an application can be made to the statutory maintenance service at any point by either parent. That would override any existing voluntary arrangement.”—[Official Report, Child Maintenance and Other Payments Public Bill Committee, 19 July 2007; c.125.]
There is no point in a party entering into a voluntary agreement that undermines the essence of what the Bill is trying to do. As I said at the time, it will undermine those who wish to make a clean break by agreeing to a different method of dealing with ongoing support rather than periodic payment. By implementing the rule, the Government are giving with one hand what they are taking away with the other.
I do not suggest that such an agreement would suit everyone; clearly it would not.

Andrew Selous: The hon. Gentleman’s point brings to mind some of the questions that my hon. Friend the Member for Weston-super-Mare posed to the Secretary of State on Second Reading about the enforceability of private agreements. Would the hon. Gentleman like the voluntary agreements to have legal force and for the organs of the state to ensure that they are adhered to?

Michael Weir: That is exactly my point. I cannot speak for the English law, as I am not certain of the position in England, but in Scotland once a minute of agreement has been entered into and registered in the books it has legal force. It can be implemented in the same way as a decree of court without any proper procedure for going back to court. It is a very effective, clear way of dealing with such problems.
I reiterate the point: most agreements would recognise that circumstances change. If there is a material change in circumstances, the parties could go back to court and renegotiate the agreement. Most parties to these agreements have undertaken independent legal advice on their interests. It is not a case of it being imposed by one party on the other; the agreements are usually negotiated with independent legal advice in respect of the future.
I tabled amendment No. 90 to delete the clause that implements the 12-month rule. Resolution approached me and pointed out that the effect of my amendment would not be what I intended as deleting the 12-month rule may mean that someone could go back to the court at any time; it suggested amendment No. 125 as an alternative. It made much the same point as I made, referring not to the Scottish minutes of agreement but to the English system of court order in which once a court order has been made either party can apply to the agency for a calculation after a 12-month period, which only serves to undermine the basis of agreements reached between the two parties concerned.
The 12-month rule clearly facilitates a non-resident parent to transfer between the two state systems, using that as a delaying tactic for the payment of child maintenance in the future. Practitioners say that it has frequently been used as a tactical ploy, and has undermined any trust that may have been created between the parties on reaching an agreement.
I have raised this important point on numerous occasions and I would like the Minister to reconsider it. The Government are trying to get parties to agree between themselves, which is the way forward, as agreement can defuse much of the tension and bad feeling in the break up of a relationship. However, if there is uncertainty and a period when either party can simply go to the agency and overturn any agreement after a period of 12 months, it will undermine the good work done in other parts of the Bill. The proposal needs to be reconsidered and I shall be interested in what the Minister has to say about it.

James Plaskitt: I acknowledge the hon. Gentleman’s determination. As I think he knows, the existing 12-month rule applies where parents have a consent order, or a minuted agreement in Scotland, made on or after 3 March 2003. It operates to prevent parents from applying for a maintenance calculation for the first 12 months that a consent order or minuted agreement is in place, but either parent may apply for a maintenance calculation once the year has expired, thus overturning the order. Amendment No. 90 would mean that parents who had consent orders or minutes of agreements in place would be prevented from having access to a maintenance calculation made by the Secretary of State or the commission.
We do not wish to restrict any effective and agreed maintenance arrangements, in whatever form, to 12 months or any other period. In fact, the repeal of section 6 would break the link with the benefits system, so that any existing maintenance arrangements will not be overturned simply because the parent with care claims benefits—only the action of one or both of the parents can do that. We want to encourage dialogue and agreement between parents that leads to effective maintenance arrangements providing ongoing support for children. We hope that parents will not need to turn to the commission for a calculation under the statutory scheme.
The agreements will continue and benefit the children for as long as both parents want them to. However, if things go wrong or a parent decides that another type of arrangement would be more suitable for their children, they need a readily available route into the commission. Children must not be left for considerable periods with no maintenance or inadequate arrangements, and we should not lock parents into agreements that are no longer working. The 12-month rule is an important component of the overall child maintenance system. It encourages settlements that contain fair levels of child maintenance that are broadly consistent with the amount calculated under the statutory scheme and discourages old-style clean break agreements that divide property and assets between adults but leave children without regular ongoing payments of maintenance.

Tim Boswell: For clarification, when the Minister was talking about the various circumstances in which the agreement may no longer be appropriate, did he primarily have in mind cases where the agreement had not been complied with by one of the parties and in that sense had broken down, or where the agreement between the parties was no longer fair? Those are somewhat different circumstances. If one could introduce a sort of judicial process, one would like to be friendly if the situation were unrealistic and perhaps more intolerant if the situation was simply non-compliant.

James Plaskitt: I understand the hon. Gentleman’s point. A number of circumstances can lead to a breakdown of an arrangement and, whatever those are, it is important that we give parents the chance to come to the commission, if they have to, to get the issue sorted out. We must remember that the overriding interest is the flow of maintenance to the children. Any number of circumstances can lead to a breakdown. We want a system to be behind the parents to provide support in resolving a disagreement and to put an alternative agreement or arrangement in place to get the maintenance flowing again. If parents are stuck in a court agreement without the option of coming to us, that is not working in the interests of the child or children who are being supported.

Michael Weir: These agreements are enforceable. If one party is not implementing the agreement, there is a route whereby that could be enforced relatively quickly. It is not a case of there being no flow of maintenance. The danger in what the Minister proposes is that, if an agreement is entered into and one party suddenly decides after 12 months, for whatever reason, that they want to overturn it, it can be overturned by going to CMEC, irrespective of whether it is fair. That will lead to a dispute between the parties that will lead to people being reluctant to enter into agreements in the first place.

James Plaskitt: It is fair enough for the hon. Gentleman to mention risks, but there are risks in what he is proposing as well. That is why it is important that we try to strike a balance. We are anxious not to have a situation where we revert to encouraging clean-break arrangements with no account being made of the flow of maintenance for the children. That has to be balanced against what he says.

John Penrose: I am intrigued by what the Minister says about trying to discourage clean-break arrangements, because the whole tenor of the rest of the Bill is to try to encourage voluntary agreements between parents. They will understand what is best for the ending of their relationship and for the children who have resulted from it. The Government do not seem to trust them that far, and seem to believe that if there is a division of assets, which may then have an impact on income and therefore the ability to support the children and provide child maintenance in future, that is not an acceptable arrangement. I wonder why the Government want to draw a boundary around that.

James Plaskitt: With respect, that is not quite the point that I am making. The clean-break arrangements to which I am referring have come out of the court system in the past, whereby the terms of the divorce or separation settlement deal only with assets and property, and do not deal with, or make provision for, ongoing child maintenance. That is a different point. The hon. Gentleman is right: of course we want to encourage parents to come to their own arrangements, and I believe that the vast majority are capable of doing so. Some will need support to do it, and that is why the support service is there. Some who cannot do it, for whatever reason, need a statutory scheme to which to refer in order to put the maintenance in place.

John Penrose: If, for example, there were a situation in which a parent with care had a modest income that would not be sufficient to provide a decent upbringing for the children because he or she would have to make mortgage payments on the family home, it is possible that the parent who is leaving would say, “You take over the family home. You might be mortgage-free. That would therefore free up a lot of your income and you will be able to provide for the children, and that capital sum is the equivalent of an endowment instead of an ongoing income payment.” Why do the Government not accept that? Why are they actively undermining it and preventing it from happening?

James Plaskitt: I would not go so far as to say that that is what we are doing. What we are saying under the CMEC arrangements is that parents might want to come to their own arrangements or agreements. They may come to an agreement of that nature, but the point is that part of the advice and support service that we are setting up gives separating parents an indication of what is reasonable to expect and what they should be going for if they are not certain. We had a lengthy discussion about that before the recess. It is not for us, at the end of the day, to say that that is what people must do. We are turning towards people’s sense of responsibility, but we are saying that there is guidance as to what we would put in place if people were to refer to the statutory scheme. People could infer that that is deemed to be a reasonable settlement, but it is important for us to have in place, behind all those voluntary arrangements, a statutory scheme that will put an arrangement in place if parents cannot reach agreement.

Michael Weir: In effect, the Government are saying that people have to go down this route. Otherwise, why would anybody do it? Why would anybody enter into an agreement where, in effect, the Government are saying that that is what they expect? One party can go to CMEC after 12 months, overturn the whole agreement, and go down the statutory route. In effect, the Government are saying exactly what the Minister seems not to be saying.

James Plaskitt: We are getting stuck on this, because I do not agree with the hon. Gentleman. It is about striking a balance between the various risks that are at play, and we believe that by sticking to our position on the 12-month rule, that is exactly what we are doing.

John Penrose: Can the Minister give an example of an occasion when it would make sense to suggest to a parent without care that they should make some sort of up-front capital grant to the parent with care in lieu of ongoing maintenance payments in, for example, the situation that I have described where a family home is encumbered by a mortgage? Why would that ever make sense under the situation that the Minister is describing?

James Plaskitt: This is not as difficult a concept as we are making it. It is the case that in some instances where couples separate they might try to come to an arrangement about the asset that they have jointly owned and contributed to. We know that that is a common feature, and we have all dealt with such cases. However, the point is what is done with that asset when the couple separates. Most people will not assume that an arrangement about that is adequate to cover child maintenance, which could be ongoing for many years. Most couples would not want to see that as part of an accepted settlement and would not feel it to be an appropriate arrangement. That arrangement is made at one point in time when couples break and is a decision about how to divide jointly owned assets. There is then the ongoing issue of what provision is to be made for the maintenance of children. At the point of separation couples might need to buy separate homes. All sorts of other issues might occur in the future that cannot be anticipated when the assets are divided up.
What couples want to do—and what the vast majority do—is to decide on the split of assets and then decide on ongoing child maintenance. Most see those as entirely separate things. If parents are unable to reach an agreement on that, there is a statutory scheme under the CMEC plan to which they can turn and an advice service on which they can build any agreement to which they are trying to come. That is an advance on the current situation.

Mark Harper: It is not the case that an asset transfer is a one-off event? With a significant transfer in assets, there is an ongoing income stream or a non-expense stream of payments that have been avoided. It is an ongoing thing. No professional adviser in this country would advise somebody to make a capital payment if somebody can then come after them for income. No one is going to advise that because it would be a failure of their professional duties.

James Plaskitt: We are trying to anticipate the very wide set of circumstances in which couples separate. The whole thrust of the legislation is to encourage couples to come to their own agreements and arrangements. The decisions are for them to make about what is appropriate. The whole thrust of this reform is to not draw people unnecessarily into a system in which they do not need to be. However, there needs to be a system in place to provide an arrangement for those who cannot come to an agreement. It is not for me, or anybody else, to say what a couple should do. There are plenty of sources of advice to which they can turn in coming to a decision about how to make their clean break. We are in the business of supporting couples who are trying to make that arrangement, giving them an advice and support service to help them decide how it is done, and, as a failsafe, having a statutory scheme to which they can turn if they cannot reach agreement.

Tim Boswell: I think that we have rattled this quite firmly, but will the Minister at least take away the thought that there could be a couple—not necessarily the typical couple—in which one of the parties might be quite disingenuous or cynical and enter into an agreement on a voluntary basis in the sure and certain knowledge that 12 months later, irrespective of how sensible the arrangement, it can be pushed into the statutory CMEC formula? I cannot give the Minister the precise wording and can understand how complex it would be, but will he consider a change so that irrespective of child maintenance, which I appreciate is its proper concern, CMEC could take into account some of the circumstances which had led up to its involvement and the reasonableness of the parties? I think that it would be very difficult to do that, but the people who have raised this issue have a serious point. We all want voluntary agreements if possible.

James Plaskitt: I understand that point entirely and appreciate the way in which the hon. Gentleman makes it. I will consider it, but we have given great thought to this issue and have thought very hard about what Sir David Henshaw recommended. We have not agreed with his recommendation for very good reason. I am happy to look at the matter again, but underline that great consideration has been given to this important subject. We believe that a 12-month period strikes the balance between giving court orders a chance to bed in and work, and providing the means to resolve difficulties quickly and keep payments flowing.
When problems arise in the first 12 months, the parties can return to the court and reinforce the order. Where arrangements break down or circumstances change, the 12-month period allows swift intervention by the commission to keep maintenance flowing to children, which therefore puts parents with consent orders or minutes of agreement on the same footing as any other separated parent. I appreciate that there is great interest in the issue. I certainly accept its importance, but I hope that, having given those reassurances and responses to interventions, the hon. Member for Angus will withdraw his amendment.

Andrew Selous: I have listened with great interest to the debate. The hon. Member for Angus has made a sensible point. By tabling the amendment, he has tried to help the Government to achieve the central thrust of the Bill, which is to get more effective voluntary arrangements in place. I think that he is actually on the Minister’s side.
I will not recap the other points, other than to add that it is worth thinking for a moment, on a human scale, of the effect of what the Minister is proposing. The measure would involve removing children from the family home, which they love and know, and from the place where they have friends and attend school, because fewer non-resident parents will say, “You keep the house and that is part of my settlement,” which, as the Minister has said, can be undermined.
I will not reiterate the other points, because they were made clearly. I agree with the points made by my hon. Friends the Members for Forest of Dean, for Weston-super-Mare, and for Daventry. If the hon. Member for Angus chooses to press the amendment to a vote, we will support him.

Michael Weir: I have heard what the Minister has said, but this is an important point. I accept the defects in amendment No. 90, but I want to press amendment No. 125 to a vote.
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 125, in clause 15, page 7, line 18, at end add—
‘(2) In section 4 of the Child Support Act 1991 (Child support and maintenance), for subsection (10) substitute—
“No application may be made at any time under this section with respect to a qualifying child or any qualifying children if there is in force a maintenance order in respect of that child or those children and the person who is, at that time, the non-resident parent.”.’.—[Mr. Weir.]

Question put, That the amendment be made:—

The Committee divided: Ayes 7, Noes 9.

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Christopher Chope: With this it will be convenient to discuss new clause 1—Application to Commission by third party—
‘Where a child’s welfare is at risk because appropriate maintenance arrangements have not been established, a third party specified by the Secretary of State can, on behalf of the child, make an application to the Commission.’.

Andrew Selous: New clause 1 gives a power to institute maintenance arrangements, where they have not been put in place by a parent with care. It would apply only in extreme circumstances in which the parent with care is considered not to be acting in the best interests of the child. The power would be exercised as an extreme fall-back position in, hopefully, very few but none the less important cases, if the welfare and financial well-being of the children concerned is not being taken into account and promoted by the parent with care. We are considering a case where a parent with care has recklessly failed to pursue maintenance and is not acting in the best interests of the children concerned.
Social services or the courts might wish to exercise the power in question. In some circumstances, parents with care are deemed by social services to be fit and proper parents and can continue to care for their children, but, perhaps due to addiction problems or a lack of willingness to engage with the financial process, they might not see fit to approach CMEC or to establish a voluntary arrangement to get the maintenance flowing to them and their children. We do not imagine that such a thing would happen in a wide range of circumstances, but, following our debate on clause 15, many parents with care will come out of the child maintenance system, because they cannot be forced into it due to being in receipt of benefit. Do we imagine that all such parents with care will want voluntarily to establish maintenance agreements? Hopefully, a large number of them will do so, which is the Minister’s wish and the wish of all Committee members. However, there will be hard cases where parents do not act in the best interests of children, and new clause 1 would allow others to put maintenance arrangements in place.
It goes without saying—although Committee members will, perhaps, raise the issue—that domestic violence and fear are real for all our constituents, as are instances of people being pursued. I want safeguards to accompany the exercise of this power, so that it is used only if the safety of the parent with care is absolutely guaranteed. The parent concerned may be in a women’s refuge at an address unknown to the non-resident parent, where their safety is guaranteed.

Paul Rowen: Will the hon. Gentleman tell the Committee who he envisages being able to make such an application? Which groups of professionals does he mean? He was eliciting some examples of at-risk situations, but how would he define “at-risk”, thereby enabling people to make an application?

Andrew Selous: The hon. Gentleman has asked two questions, the first of which is who might make such applications on someone’s behalf? I am referring to professional people in contact with a family and the parent with care who are charged with having an overview of that family’s welfare. We are talking about people working in social services, court staff, Jobcentre Plus staff—if they were aware of the circumstances—and accredited welfare rights officers, perhaps at the citizens advice bureau.
For some people, the whole world of finance is an unknown. Given the lamentable state of financial education, our deliberations, and even knowledge of the new Bill, will pass far over the heads of large numbers of our fellow citizens throughout the country, who will never hear about this. Under section 6, people were dragooned into the system, and we have been through the arguments why that is not appropriate. The new clause reserves an important residual power, which would be exercised with discretion, caution and absolute concern for the safety of the parent with care.
The hon. Gentleman had a second part to his question. Will he remind me what it was?

Paul Rowen: It concerned the hon. Gentleman’s definition of “at risk”.

Andrew Selous: Any children who are in poverty or on benefits and who could be lifted out of poverty by the receipt of regular child maintenance are, by definition, children who would be “at risk”. The clause would not be used in cases where wealthy couples have separated. We are talking about people in dire financial circumstances.

James Plaskitt: I am grateful to the hon. Gentleman for tabling his new clause. I have listened carefully to his defence of it, but I think that he will understand why I am going to encourage him to withdraw it. The more one considers the measure, the more one begins to see the real problems in going down that road. There are several problems that make the measure effectively unworkable.
I take the point that the hon. Gentleman is talking about people in extreme circumstances, but the problems arise when such circumstances are looked into. For example, who are the third parties are going to be? That is a real concern. In his speech, he made a few suggestions about who the third parties would be—I was keeping a list. He mentioned social services staff, perhaps the courts, perhaps Jobcentre Plus staff, welfare officers or people who work for the citizens advice bureau. There are real problems with the idea that we could somehow designate these people and put them in a position of taking the serious step of referring the welfare of another child, with whom they have no relationship, to the commission. They would need to instruct or request the commission to begin the process of determining an agreement for that child, which would be fraught with difficulties. Who will the Secretary of State accredit with the ability to do that? I cannot see any means of coming up with a definitive list of who could be accredited in those circumstances, which is the major difficulty with the hon. Gentleman’s proposition.

Andrew Selous: I am a little surprised by the Minister’s comment that those people would have no relationship with the child. I am not particularly suggesting that this category of professional might be one who would instigate this. For example, an educational welfare officer might be intimately involved with a family and visit them at home because the child is not turning up at school. They might find that the reason why the child is not turning up is a matter of finance, due to deep poverty within the home. There are many professionals of the state—employees of central and local government—whose job it is to have an intimate relationship with that family and keep the welfare of the children at heart.

James Plaskitt: I return to the question of where we draw a line to determine who can or cannot act in that way. With respect, the hon. Gentleman cannot say where that line would be drawn. If we were to pursue his new clause, the line would have to be drawn somewhere, and it would be impossibly difficult to determine who is authorised to make such interventions.
A more profitable route would be to consider the information and advice service. I hope that people dealing with families in the circumstances that the hon. Gentleman has discussed, and who are perhaps aware of the risk to a child who is not receiving the maintenance to which it is entitled, would refer to that service. That is the route that one should take in order to resolve the issue, rather than one in which a third party—especially as there is an issue about who that should be—initiates a process when they do not have a biological relationship with the child. It is better to refer to an information service to encourage either of the parents to initiate the process in support of the child. I am with the hon. Gentleman on his objectives, but I think that the question is one of means.

Tim Boswell: We are having the right kind of discussion about this difficult issue. I want to probe the Minister about something he has just said. It is clearly sensible for the information and advice service to advise the parties to do that and to give them all the encouragement they need in what might be a daunting process—issues such as domestic violence may colour things. I am not quite clear whether any party has the power to refer the circumstance of the case to the information and advice service over the heads of the individuals involved. There are data protection and confidentiality issues that should perhaps be considered.

James Plaskitt: I do not think that that requires a power. The people working in support services will become aware of the service that we are setting up. They will know of it and will be able to refer to it, just like anyone else. Having done so, they will be able to recommend what action an individual can take.
There are other problems with the new clause. For example, who will make the judgment that the circumstances pertaining to the child are not appropriate? That is very much a judgment call. One individual, as a third party, might look at the circumstances and say, “They are not good enough for the child.” However, another third party might not agree with that view.
Then there is the question of how the commission will respond to such referrals and how it will check their validity. I hope that hon. Members agree that as we go further into what the hon. Member for South-West Bedfordshire has suggested, there are genuine practicality and workability issues. Although I take on board the motive that has driven him to table the new clause, those issues are fatal flaws in the practical step that he has suggested. I therefore hope that he will not press the new clause.

Paul Rowen: Will the Minister give way?

Christopher Chope: I think that the Minister has already sat down.

Andrew Selous: I am happy to give way if the hon. Gentleman wants to intervene on me. I am grateful to the Minister for his explanation. I am not blind to the definitional issues that he has raised. I concede that they probably are fatal, as far as the new clause is concerned.

Paul Rowen: Bearing in mind the Minister’s earlier comments, does he not feel that an enabling order is needed to follow this Bill? We need a clear definition of the steps that can be taken. I am thinking of the cases that the hon. Gentleman was referring to in which there may be an issue about domestic violence and the parent is not making a claim, because of their situation. Clearly, somebody who is independent will see that if action is not taken, the child will suffer.

Andrew Selous: I agree with the hon. Gentleman. I would prefer to have that clarity included in the Bill, rather than in secondary legislation and an enabling order at a later date. I very much support what the Minister has said about information and advice. He will probably remember earlier debates, when I said that I would like the Department to go a lot further on that particular angle.
Finally, I will have a bet with the Minister.

James Plaskitt: I am not a betting man.

Andrew Selous: Then I shall put this contention to the Minister: in years to come, when social services have the sad but important duty of removing children from their parents, they will list in their many and varied reasons, the failure to apply for child maintenance. That failure will be one of the factors in perhaps a long list that will contribute to children being removed from their homes, which may be the proper thing to do.

Question put and agreed to.

Clause 15 ordered to stand part of the Bill.

Clause 16

changes to the calculation of maintenance

Paul Rowen: I beg to move amendment No. 46, in clause 16, page 7, line 22, at end insert ‘(subject to subsection (3))’.

Christopher Chope: With this it will be convenient to discuss the following amendments:
No. 48, in clause 16, page 7, line 22, at end insert—
‘(2) The Secretary of State must, before Schedule 4 comes into effect, publish a report, including statistical information, on the effect of using the following levels of income variation—
(a) 20% increase;
(b) 15% increase;
(c) 10% increase;
(d) 5% increase;
(e) 20% decrease;
(f) 15% decrease;
(g) 10% decrease;
(h) 5% decrease.’.
No. 49, in clause 16, page 7, line 22, at end insert—
‘(2) The Secretary of State must publish a report on the criteria which will apply to evidence brought before the Commission by a parent with care who wishes to appeal against a maintenance calculation.
(3) A Minister of the Crown must make a motion in each House of Parliament in relation to the report mentioned in subsection (2) before the coming into effect of Schedule 4.’.
No. 47, in clause 16, page 7, line 22, at end insert—
‘(2) The Secretary of State must publish a report, including statistical information, on the likely actual impact of the move from using net income for maintenance calculations to gross income.
(3) A Minister of the Crown must make a motion in each House of Parliament in relation to the report mentioned in subsection (2) before the coming into effect of Schedule 4.’.
No. 14, in clause 57, page 43, line 22, after ‘sections’, insert
‘16, [Duty of HM Revenue and Customs to ascertain financial circumstances of non-resident parent],’.
New clause 2—Duty of HM Revenue and Customs to ascertain financial circumstances of non-resident parent
‘(1) In section 11 of the Child Support Act 1991 (maintenance calculations) after subsection (6) insert—
“(6A) Where subsection (6) applies or an application for a variation under section 28 has been made by either the non-resident parent or the parent with care and any question arises concerning the income of the non-resident parent—
(a) HMRC shall take all reasonable steps to investigate and verify the financial circumstances of the non-resident parent in order to establish his income for the purposes of this Act or regulations made under it;
(b) the non-resident parent shall provide such information as is required by HMRC in order to verify the financial information submitted by him or on his behalf.”.
(2) After subsection (8) of that section insert—
“(8A) In this section “HMRC” means the Commissioners of Her Majesty’s Revenue and Customs.”’.
New clause 3—Enhanced enforcement to coincide with changes to the calculation of maintenance
‘When applying section 57 of this Act, the Secretary of State shall only implement the provisions contained in sections 19 to 28 inclusive of this Act on such day as the provisions contained in section 16 and [Duty of HM Revenue and Customs to ascertain financial circumstances of non-resident parent] of this Act also come into force.’.
New clause 6—Financial circumstances of non-resident parent
‘(1) In section 11 of the Child Support Act 1991 (maintenance calculations) after subsection (6) insert—
“(6A) Where subsection (6) applies or an application for a variation under section 28 has been made by either the non-resident parent or the parent with care and any question arises concerning the income of the non-resident parent—
(a) the Commission shall take all reasonable steps to investigate and verify the financial circumstances of the non-resident parent in order to establish his income for the purposes of this Act or regulations made under it;
(b) the non-resident parent shall provide such information as is required by the Commission in order to verify the financial information submitted by him or on his behalf.” ’.
New clause 14—Provision of information
‘Government departments, non-departmental public bodies and the Courts shall provide all such information as the Commission may reasonably request to—
(a) enable the Commission to form a correct maintenance assessment; and
(b) locate the address, workplace, or other places, where any parent who has an undischarged maintenance liability may be found.’.

Paul Rowen: The clause deals with changes to the way in which maintenance is calculated. I want to discuss amendments Nos. 46, 48, 49 and 47 and new clause 6.
I want to consider the new clause separately, so I shall start with the four amendments. The amendments address the new assessment process, which will be based on gross income for the non-resident parent with the data coming from HMRC. Although the change to using HMRC to provide the data is welcome, there is a concern that the data will be one or two years out of date, particularly for a self-employed, non-resident parent.
The Bill allows for reassessment, but only if income has risen or fallen by more than 25 per cent. The idea behind the amendments is to reduce the administrative burden on HMRC created by reassessments, which might mean that children end up receiving less under the new system. The amendment asks for an investigation into the effects of varying this level on the caseload of the CMEC. We also need more information on the proportion of non-resident parents, both employed and unemployed, whose income differs substantially from one year to the next and who may have spells of unemployment in any one year.
I am not suggesting that that should happen annually, but given that we are discussing a new structure and a new assessment, we need to predict the effect of those changes on people in different income bands and the difference that that would make in principle to the level of maintenance that parents with care receive. I put it to the Minister that that could be carried out fairly quickly once the Bill has received Royal Assent, so that we can get some indication of the changes. The Minister may well say that it is a matter for the commission, as it is the body charged with dealing with that, but as Members of Parliament who will be dealing with individual cases, we need to know what information the parent with care will need to provide in order to initiate an appeal. I hope that the Minister can give us some idea of what the level of information will be.
New clause 6 is slightly different from new clause 2. Both new clauses would place a duty on statutory authorities to investigate non-resident parents. In the case of new clause 2, that investigative duty is with HMRC, and in the case of new clause 6 it is with the commission. I want to quote two pieces of evidence that were given at the start of our deliberations about non-resident parents who are self employed. Referring to the resident parent having to provide information to the CSA, as it currently constituted, in order for it to initiate an investigation, Stephen Geraghty said that if the CSA can provide it, it will do so.

Michael Weir: I understand what the hon. Gentleman is saying, but is his experience not the same as mine, that parents with care complain that, although they have given the information to the CSA, nothing happens and there is no investigation? The Minister has accepted that that was because the CSA does not have investigative powers in a lot of those cases, which is a serious defect.

Paul Rowen: I agree with the hon. Gentleman. The CSA has a statutory right to investigate, but it does not have the resources to do so as it is currently set up. Given the situation, I disagree with the proposals to use HMRC. If one deals with a non-resident parent who is a self-employed director of a company, it is quite possible for them to arrange their financial affairs to be, as is said colloquially, more tax-efficient. That may well reduce the visible income and, therefore, the amount of child maintenance to be paid. I know that One Parent Families and Gingerbread have provided a briefing that includes several cases showing how it is possible for not only millionaires but ordinary, self-employed people to change their tax affairs to make it more difficult for the parent with care to pursue their claim.
I put it to the Minister that we should not be putting the onus on the parent with care to have to prove that, because the parent with care may have separated in difficult circumstances and may not be in the best position to know the ins and outs of the non-resident parent’s income—they may only know background information. There is no requirement for the non-resident parent to provide full information to the commission. Stephen Geraghty’s comment says it all by putting the onus on the parent with care.
I also want to quote Janet Allbeson, who asked us in the evidence sitting where the pressure would come from. As she said, it will be parents with care who are not getting anything at the moment who will think that at least they can get something. However, where will they get the information from? New clause 6 is important, because we are saying that we are introducing a new arrangement, trying to encourage people to make voluntary arrangements and setting up information and support services to enable such voluntary arrangements, but, where a parent is clearly determined to avoid their responsibilities at all costs, there must be statutory back-up to make them declare what they are doing.
Turning to the difference between new clauses 2 and 6, new clause 2 puts that responsibility on HMRC. I put it to the hon. Member for South-West Bedfordshire, who tabled new clause 2, that HMRC’s primary responsibility is the collection of taxes—it investigates tax fraud and is keen to ensure that such investigations take place. It is not charged with the effective and efficient calculation of child maintenance, which is still the responsibility of the commission. I put it to the hon. Gentleman that new clause 6, which would give the commission the power to order the non-resident parent to provide the information, is a more appropriate way of going forward.
HMRC will have to be involved and it has the database that will be used to provide much of the calculation. However, where a non-resident parent has been tax-efficient and is therefore avoiding child maintenance payments, perhaps by switching from earned income to dividends, the issue, as far as HMRC is concerned, is dealt with. The issue, however, it is not dealt with as far as the resident parent is concerned because, while that is not earned income, it is still income that the non-resident parent is receiving. I hope that the Minister will look at that. As I said, the first few amendments are probing. We want an assurance that a review will take place before the Bill is operational so that we have an indication of the number of parents whose income changes within a year and what effect that is likely to have on the amount of child maintenance collected by the new procedure. Again, that information should be available from HMRC’s database.
Finally, new clause 6 is very important because unless and until we have the statutory back-up for the new system—we partly discussed this earlier—we are still going to let down those children in that particular situation. I appreciate that Ministers may say, “Well, it’s only 7 per cent. of all the cases involved.” Nevertheless, for the children involved that is 7 per cent. too much. We ought to be using this opportunity to ensure that while we are encouraging voluntary agreements, we have a statutory back-up for cases where one parent is attempting to use the tax system to avoid their parental responsibilities.

Andrew Selous: This important set of amendments and new clauses cuts right to the heart of so many problems that the CSA has experienced in recent years. It is important that we get this area of the Bill absolutely right. It is a large and somewhat unwieldy group of amendments, so we will probably be spending a little time on it as we go through everything. It merits a serious debate, which I hope all members of the Committee will contribute to fully.
Amendment No. 14 has the effect of introducing provisions in schedule 4 from the moment that the Bill receives Royal Assent, rather than delaying it. That is important because it would give CMEC the power to use HMRC data straight away so that the tougher enforcement powers, which I hope we will discuss later, can be used on accurate assessments. I cannot stress how important it is that the tougher enforcement powers go hand in hand with the stronger enforcement powers because, as we all know from our case loads as constituency Members of Parliament, faith in the system will only be restored if the assessment process is more accurate and if those accurate assessments are enforced.
The National Audit Office estimates that 65 per cent. of assessments put forward for enforcement were incorrect. That is at the heart of many of the problems that arrive in our mailbags week in, week out, and it is deeply unfair to the non-resident parents who have incorrect assessments and highly frustrating for the parents with care and, most importantly, for the children who do not receive the correct amount of money. Amendment No. 14 and new clause 3 are important because they would allow HMRC data to be used straight away and ensure that those powers link up with the tougher enforcement powers, which are going to come in straight away, as my hon. Friend the Member for Forest of Dean will no doubt tell us later.

Tim Boswell: Does my hon. Friend agree that it is important to get it on the record that this is not a passive, investigatory exercise between parties who just happen to have levels of income or expenditure requirements as givens. Obviously, if somebody is in the “won’t pay” category rather than the “can’t pay” category, they will resort to various devices, with which we are all familiar—such as self-employment—to disguise the nature of their income, and a vigorous, proactive investigation will be needed to get to the bottom of where they really stand.

Andrew Selous: My hon. Friend is right. He has, as he often does, put his finger on it by talking about a sector of non-resident parents who perhaps have their own businesses, are self-employed, are slightly more financially literate than most of the population and are able to arrange their affairs in such a way that they can—wrongly—minimise their child maintenance payments. It is important that we deal with those issues.
In discussing this group of amendments, I want to explain further some of the measures dealing with the matter raised by my hon. Friend. New clause 2 would give stronger investigatory powers and put a greater onus on Her Majesty’s Revenue and Customs to investigate and get to grips with the current ability of non-resident parents to pay the maintenance that they should be paying.
I hear what the hon. Member for Rochdale says about new clause 6 and how the tough, investigatory powers should primarily lie with CMEC, whereas my new clause 2 says that the primary focus should be with HMRC. The truth is that we will need the fullest possible co-operation between HMRC and CMEC if the Bill is to be a success. All sorts of practical issues, in terms of data sharing, IT systems and basic communications, will have to be got right if we are to make a success of this. There are different approaches in my amendment and the one tabled by the hon. Gentleman. I will justify why I tabled new clause 2, rather than new clause 6, as I proceed. However, I hope that he will agree that there is, in essence, a fine divide because we will need full and good co-operation between HMRC and CMEC if we are going to crack some of these difficult problems.

Paul Rowen: I understand the hon. Gentleman’s points. We will deal with IT systems under the next group of amendments. Does he not accept, however, that CMEC’s prime responsibility is child maintenance and HMRC’s prime responsibility is collecting taxes? Therefore, the body dealing with child maintenance should be the principal body, albeit working closely with the other?

Andrew Selous: I understand that, but let me take the hon. Gentleman back to his party’s previous position, which he is arguing against, if I remember it correctly. He wanted to transfer virtually the whole of the Child Support Agency to HMRC. A little trip down memory lane tells me that he has moved some way from a position about which many of us had to listen to for some time and with which we did not fully agree.

Tim Boswell: Is it not also a consideration that, although it is accurate to say that HMRC’s job is to collect taxes, along the way it has become the expert in the assessment of income and the avoidance of Spanish practices to disguise income? It is important that it should be in the lead in smoking out people who seek to conceal their real situation.

Andrew Selous: My hon. Friend is right. Let us put ourselves in the shoes of a non-resident parent who is playing fast and loose, frankly, and is morally wrong in not providing the amount of maintenance that should be going to his children. If the telephone rings or a letter arrives on his desk—in the days when we get a postal service back—and one is headed “CMEC” and other is headed “HMRC”, I wonder which would make us quake most in our boots. Whether rightly or wrongly—and for many of the right reasons—HMRC has something of a Rottweiler reputation. For hundreds of years it has pursued us to get money from us, and most of us would say that they probably do that pretty successfully. It has strong, tough powers to do so, and rightly so because the Government need revenue.
People would be more likely to jump if Her Majesty’s Revenue and Customs took the lead in assessing the right amount of income as it is HMRC data that will be used. The hon. Gentleman cited support for his approach to new clause 6 from One Parent Families, but I draw his attention to page 5 of its brief, which states:
“At present, despite extensive powers to seek information and require its production, the CSA simply lacks the confidence and financial expertise to scrutinise the financial affairs of suspected non-resident parents”.
One Parent Families seems to be arguing slightly against its own case.
Under new clause 2, HMRC would have to refashion some of its priorities in pursuing non-resident parents. No doubt, there are those high up in the Revenue who say that the objective should be to go for those cases in which it can extract the most revenue and to ignore some of the smaller ones. I hope the Minister is having conversations with Treasury Ministers about the Child Maintenance and Enforcement Commission to ensure that when its prior year data is being used, HMRC is committed to the objective of preventing the past financial chicanery and of ensuring that there is full and accurate disclosure. If the Minister has not had such conversations with Treasury Ministers, perhaps he will assure the Committee that he will do so, so that the proposal can work properly and effectively.
New clause 14 is about the importance of all Departments, non-departmental public bodies and the courts sharing and providing all the information necessary for CMEC to do its job. I forgot who said it, but in a previous sitting—in an evidence session or perhaps on Second Reading—we heard about a case in which a non-resident parent pleaded poverty to the Child Support Agency, saying that he could not possibly make the unreasonable maintenance payments demanded of him, at the same time as he was presenting himself to the Home Office as a man of substantial means who could well afford to support the new foreign bride he was hoping to be allowed to bring to this country.
The message needs to go around Whitehall loud and clear that there should be basic data sharing among Departments, which should link up and speak to each other. I hope that the Minister and his colleagues are taking the lead in that respect, and that they have been round, knocked on doors and had conversations to ensure that the data flows. We know from the intractable problems in the past that unless there is the greatest possible sharing of information between Departments to build up a full and accurate picture of the non-resident parent’s state of affairs, we will not crack the problems presented by these serious issues.
The Bill touches on some important matters about the nuts and bolts of getting enforcement to work: using HMRC data straight away; being fair in respect of the tougher enforcement powers; using only accurate data—the data is inaccurate in 65 per cent. of cases; and ensuring that information is shared. This is a large, unwieldy group of amendments, but these are important issues and I look forward to hearing what the Minister and other members of the Committee have to say about them.

James Plaskitt: I shall give a full response to this large group of amendments and I hope that the Committee will bear with me, as there are many very important issues to be considered. I will divide my response into three broad areas.
First, there are those amendments that require the Government to publish statistical reports before the new arrangements for calculating maintenance come into effect. Secondly, there are amendments that have an impact on the timing of the commencement of different parts of the Act, including an amendment which means that collection and enforcement powers could only come into force from the time the changes to the calculation of maintenance come into force. There is also an amendment that would mean that the new calculation arrangements would come into force on the day that the Bill receives Royal Assent. Thirdly, a set of amendments would provide ongoing obligations once the new arrangements are up and running. In particular, they would require routine investigations into all non-resident parents’ incomes.
Amendments Nos. 46 and 47 would require the Government to publish a report outlining the impact on cases of the move to use gross rather than net weekly income when making statutory maintenance calculations, and to make a motion in each House about this report. Using gross income data already held by Her Majesty’s Revenue and Customs rather than asking the non-resident parent to supply net weekly income details, will remove one of the significant causes of delay in making maintenance calculations.
Our intention is that the effect of the move from net to gross weekly income should be broadly the same across the income range. That is the reason for the new percentages for basic rate cases. I would add that that intention resulted in changes to the rates originally announced last December in the child maintenance White Paper. In particular, it resulted in the introduction of a second set of percentages to be applied to higher income levels.
We already published in May this year information showing the impact of moving from net to gross weekly income in our response to the Select Committee on Work and Pensions’ fourth report. The amendments would require publication of analysis showing the actual impact of the change on individual cases at the point at which it is implemented. In reality, such analysis is unlikely to be available. The first reason for that is because the composition of the case load is likely to change as we start to allow parents to make their own arrangements for child maintenance. At this time there is no way of knowing precisely which cases will remain in the statutory maintenance service and which will leave. Secondly, we would need to make estimates of what non-resident parents’ incomes would be in 2010, and, again we have no way of knowing how accurate such estimates might turn out to be.
Amendment No. 48 would require the Government, before bringing into effect the new rules for calculating statutory maintenance, to publish a report on the effect on maintenance assessments of different levels of income variation. The new calculation rules will include provision for an annual review, so that more recent HMRC data can be used, enabling calculations to be updated. Parents will be able to ask for an alternative calculation based on the current income of the non-resident parent where this differs from the HMRC income data used by at least 25 per cent. That threshold will provide more stability for parents in the amounts to be paid and allow the commission to concentrate on getting money flowing. The amendment calls for a report showing the effect of different levels of income variation. For the same reasons as those that I gave for rejecting amendments Nos. 46 and 47, it is not possible to produce robust analysis at this time. I should add that the regulations to be made under the Bill, which would provide among other things a definition of gross weekly income and the 25 per cent. income tolerance rate, will be affirmative. We will, therefore, produce relevant analysis to assist Parliament in its scrutiny of those regulations.
Amendment No. 49 would require the Government to publish a report outlining the information that a parent with care would be required to provide when appealing against a maintenance calculation, and to make a motion in each House about the report. We are not planning to change the current process, and parents will have the same rights to query and challenge a decision by the commission as they currently do. That means that there will still be no requirement for an appellant to provide supporting information for their appeal. The only information required will continue to be that necessary for the administration of the appeal to proceed. With that in mind, it is difficult to identify the practical benefits to be gained in publishing a report of the type proposed in the amendment.
New clause 3 would unnecessarily delay the implementation of the new collection and enforcement powers until the changes in the method of calculation of child maintenance are introduced, which is not expected to be until 2010. The purpose of the Bill is to help the commission to collect more maintenance for children. In order to provide the commission with the tools to take firm enforcement action at the earliest possible opportunity, we want to introduce the new collection and enforcement powers as soon as they can be operationally effective. Delaying that can lead only to worse outcomes for children.
In contrast to the previous amendment, the effect of amendment No. 14 would be to bring forward changes to the new calculation rules under the Bill so that they would take effect from Royal Assent, not in 2010 as currently planned. It would also require HMRC to investigate the reported earnings of non-resident parents from the earlier time. In looking to introduce new maintenance calculations from 2010, we are being careful to avoid the mistakes of the past. We know from previous experience that a maintenance calculation scheme cannot be delivered successfully without an efficient and well-tested IT infrastructure. That is particularly true in terms of the need for robust IT to support the commission in its use of HMRC income data.

Andrew Selous: I am grateful to the Minister for his further elaboration on matters. HMRC data are so important. It is one of the parts of the Bill that we are most enthusiastic about because, as I shall say for the third time, the National Audit Office says that 65 per cent. of assessments are wrong. Is he saying that the reason for not using HMRC data is down purely to IT? I want to probe him further on that. It does not strike me that we necessarily need complex computer systems to achieve a basic level of communication between HMRC and CMEC to start using the data sooner.

James Plaskitt: No, it is not down to that. The matter concerns part of the deliberations that we must go through at this stage. As the hon. Gentleman has referred to it more than once, I return to his allegation that 65 per cent. of assessments are wrong. We touched on that before the recess. He knows that we dispute that figure on the basis of how it has been defined “incorrect”. We are certain that, in reality, the number is much smaller.
I wish also to respond to the hon. Gentleman’s point about the importance of data sharing. I agree with his view. He wants to know whether we are having conversations with HMRC about data sharing. Yes, of course we are. They have been under way for some time. It is important that the data-sharing process is robust precisely for the reasons that he outlined. My general point concerns getting the sequence of the changes right, which is why I am responding to his argument.
If the proposed scheme were to commence before the link conveying HMRC data has been fully established, the efficiency gains from direct access to the data would be lost. Further inefficiencies would be bound to occur if the commission was not given sufficient time to train its staff fully or to develop all the processes needed to administer the new service. The second effect of the amendment would place an ongoing obligation on HMRC to ascertain the financial circumstances of every non-resident parent. In that respect, it is virtually identical in its effect to new clause 2, which would require HMRC to take reasonable steps to investigate and verify such income. The new clause would also add a requirement on non-resident parents to provide HMRC with any information necessary for it to complete that task.
It is important to remember that the information that the commission will use to work out the statutory maintenance liability will already have been looked at by HMRC for historic income data and the Department for Work and Pensions for those in receipt of benefits. To recheck that information for every application to the commission, which we estimate would occur more than 100,000 times a year, let alone at other times when the question about income arises, would be a prohibitively expensive and largely superfluous process. It would remove any efficiency gains from the commission’s direct access to HMRC data and would result in delays to the flow of maintenance, as the commission would have to wait for the income figure to be validated again before a calculation could be made.
The commission will be able to undertake appropriate investigations into any income information, where it believes it to be appropriate, and will still be able to pass on such information to HMRC. Non-resident parents will still be required to submit to the commission such information, if needed, to make a calculation. Failure to provide such information, or providing false information, would leave people open to prosecution. Furthermore, parents will continue to have access to the variations regime, which helps to ensure that maintenance liabilities accurately reflect non-resident parents’ ability to pay.
New clause 6 would provide an identical obligation as that set out in new clause 2 to investigate and verify non-residents parents’ income, except that it places that obligation on the commission instead of HMRC. My points about the inefficiencies arising from the duplication of effort and the possibility of adding significant delay to the calculation process apply equally, therefore, to this amendment.

Paul Rowen: Given the Minister’s earlier comments, and the comments that Stephen Geraghty made in the evidence sessions, what step is he planning to make to ensure that the commission or HMRC have employed the relevant people to enable those investigations to take place?

James Plaskitt: This leads us back to the more general debate. We do not want to burden the commission with huge duties of investigation that it is not empowered to carry out. It was that mistake that led to some of the current difficulties with the CSA. However, there are particular circumstances—especially if a parent with care reports and provides evidence—in which the CSA can require information and carry out an investigation. The commission will inherit exactly the same powers. It is important that it has the ability to do that. How it does it, the resources that it brings to bear in undertaking that task, and the skills set that it has to carry it out, are all the responsibility of the commission. It must ensure that that is part of its package, in order that it can act on the authority that it has.

Paul Rowen: I understand the Minister’s point, but given the quote that I gave from Stephen Geraghty, where the onus is being placed on the resident parent with care, does he not accept that it is often very difficult to provide evidence? What we should require is that when a complaint has been made, rather than evidence submitted, the commission then investigates. That is a lower level of responsibility than requiring evidence, which is what the Minister is suggesting.

James Plaskitt: First, we have the switch to relying on HMRC income data. That is a big step from where we are now. It is far more robust and, as several hon. Members said, HMRC is better equipped to extract that information and people will report changes to it because they are fearful of the consequences of not doing so. That is a quantum change in terms of the quality and robustness of the information that the commission will have about parents’ income. However, it will still have the power to pursue an investigation if, for example, a parent with care refers to it for consideration evidence of a suspicion that the non-resident parent is not giving the correct information—perhaps because there is a mismatch of lifestyle information. We all accept that the CSA has not carried out that function very effectively. There is a duty on the commission, knowing that it has that power and an obligation to perform it effectively, to ensure that it has the right equipment and skills set to carry out that function. I suspect that there will be far less need to do it, given that the essential body of information about income is coming in from a more developed and robust source than is the case at the moment.

Andrew Selous: I must quibble with the Minister’s arguments against new clauses 2 and 6. He used similar arguments against both me and the hon. Member for Rochdale, saying that our new clauses would weigh down HMRC and CMEC with endless bureaucracy and unnecessary extra checking. I simply draw his attention to the small word “reasonable” in both new clauses, because it is neither my nor, I am sure, the hon. Gentleman’s intention that HMRC and CMEC should waste a millisecond on cases which are clear and which do not need reinvestigating. Without a provision such as new clause 2, however, I fail to see how we will place a legal duty on HMRC to take action in cases that it is not currently investigating because they are not high value.

James Plaskitt: I know that the hon. Gentleman wants to be reasonable—he is a reasonable man—but the trouble is that he is opening the door to the possibility of the commission being swamped with references for investigation, and we do not want to get into that situation. That would not be an appropriate response, given that the income information from which the commission will work in carrying out its functions will in future come from HMRC.

Paul Rowen: I hope that the Minister appreciates that this is an important part of the Bill. Given what he has just said, what assurance will he give us that the DWP will issue instructions to the commission to ensure that the relevant arrangements are put in place? As he has rightly said, the CSA can statutorily do the things that we are talking about, but it does not. We therefore need to see that steps will be taken to ensure that action is taken where people evade payments.

James Plaskitt: I think that the hon. Gentleman knows that the commission is charged with delivering in accordance with the criteria set down in the Bill and that it remains accountable to Parliament through the Secretary of State for doing so. We therefore expect it to address all its functions and secure them in the appropriate way, which is the whole point of setting it up. It is not for me, at this stage, to prejudge or determine how it will do that, because that is a commission responsibility. However, we obviously want to ensure that that responsibility is met.
In most cases, it is highly likely that the additional effort that we have discussed would result in no change, because the majority of non-resident parents do not manipulate their income, and the information obtained from HMRC regarding their financial position can, as I have said, be safely relied on.
The final provision in the group is new clause 14, which also imposes obligations in relation to obtaining information. It would require all Departments, non-departmental public bodies and the courts to provide the commission with information when a request is made. Such a request would have to be made for the purpose of enabling the commission to make a maintenance calculation or to locate the non-resident parent, but only where maintenance is unpaid.
I want to assure hon. Members that the commission will continue to be able to request information from a wide range of sources, including employers, accountants, local authorities, the Driver and Vehicle Licensing Agency, the Prison Service and credit reference agencies.

Andrew Selous: On that point, I remember the hon. Member for Hendon (Mr. Dismore), when he and I were on the Select Committee on Work and Pensions in the last Parliament, putting to the CSA’s then chief executive the point that mobile phone companies knew non-resident parents’ addresses when the CSA did not. Forgive my ignorance, but will anything in the Bill enable CMEC to require a mobile phone company, or any other utility company, to furnish a non-resident parent’s address?

James Plaskitt: The matter of the address is important, and I am glad that the hon. Gentleman has raised it. At present, the answer to his question is no. I would not want to pursue the matter via the mobile phone companies, but we are looking at the possibility of making further amendments to the Bill to introduce an obligation to report addresses, so the issue is very much in our mind, and I am grateful to the hon. Gentleman for raising it.

Tim Boswell: On sanctions, perhaps the Minister will elucidate the following point. If somebody were to give inaccurate information, they would clearly face sanctions. If, however, they were to refuse to give information and did a vanishing act, although they were still living in the house and the letter had been correctly delivered, would that be a breach of the law? Of course, there might be indirect sanctions against them in the form of the imposition of a maintenance order. If such a refusal is not a breach of the law, is that another area that should be tightened up?

James Plaskitt: As I understand it, it is a breach of the law—unless I am subsequently corrected. It is an existing power, and there is a potential fine. That is already in statute, and that power will transfer to the new commission. Therefore it is an offence not to provide the requested information.
Schedule 6 will also allow the commission access to information held by Her Majesty’s Revenue and Customs, the Department for Work and Pensions and the Northern Ireland Office. Existing provisions already enable parents to disclose information relating to certain proceedings to the agency, if it is required for the purposes of making a statutory maintenance calculation.

Paul Rowen: I have listened to the Minister’s reassurances. On the amendments, I accept the information and assurances that he has given, but I want to press new clause 6 to a vote.

Christopher Chope: We cannot have a vote on new clause 6 now, but we can have one later on. I am grateful to the hon. Gentleman for that indication.

Andrew Selous: Similarly, at the appropriate moment, I would like to press new clause 2 to a vote.

Paul Rowen: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 16 ordered to stand part of the Bill.

Schedule 4

changes to the calculation of maintenance

Andrew Selous: I beg to move amendment No. 115, in schedule 4, page 63, line 6, leave out paragraph 2.
Schedule 4 is really what clause 16 is all about. Although we have had considerable debate on clause 16, it is only two lines long. Schedule 4, to which it refers, is the real meat of our discussions and gives effect to the important changes that we have been debating within the last group.
Amendment No. 115 is a probing amendment. I do not want to remove paragraph 2 from the Bill, but I want to use this opportunity to put a number of questions to the Minister about whether the move from net to gross income and the other measures in schedule 4 will achieve greater simplicity and operational efficiencies.
One of the big changes that schedule 4 gives effect to is the use of HMRC data from the latest tax year for which HMRC has details, which is a sensible move. However, as has been brought out in the previous debate, much will depend on the sources of information within HMRC to which CMEC has access and how that information will be accessed. It is worth noting the number of different IT systems within HMRC, all of which will have to work well and communicate seamlessly with CMEC, as I believe happens in Australia where there is a direct data link with the Australian transport agency. The Minister knows that Australia is one of my favourite countries when we discuss child support. Perhaps the Minister will tell us what he and his officials have learned that he thinks will be of use with regard to data sharing and direct computer links between HMRC and CMEC.
On those different IT systems, it is worth putting on the record that there are different systems within HMRC for dealing with self-assessment cases, pay-as-you-earn, repayment of taxes owed, national insurance and tax credits, of which I will have more to say later in our discussions.
Questions arise from the combination of earnings from self-employment and from employment. How will that work? What will happen when someone has more than one job on which they pay tax through PAYE? HMRC does not routinely link PAYE records in cases where a person has one or more jobs simultaneously. HMRC collects information on employment-related benefits that form part of gross income, but, again, that is collected from employers through a different process from PAYE.

Tim Boswell: Will my hon. Friend give consideration to circumstances that may still apply—although there are rules to deter the practice—for individuals who park their income into a corporate structure that may not actually be recorded as their personal structure, although it may be available to them?

Andrew Selous: My hon. Friend is absolutely right to raise that point, but I think that you would rule me out of order, Mr. Chope, if I went into a detailed discussion of it now. In future sittings, the Committee will discuss a series of amendments that address those issues. However, as ever, my hon. Friend is absolutely right, and he has yet again put his finger on a key issue that we must get right, namely the ability of some non-resident parents to structure their affairs in a way that may be perfectly legal as far as the tax authorities are concerned, but is frankly morally wrong, and should, in my view, be legally wrong when it concerns the avoidance of maintenance payments to children who need them and are entitled to them.
Returning to the IT challenges that will face both HMRC and CMEC, paragraph 4.9 of child support White Paper, which was published in December 2006, states:
“Discussions between the Department for Work and Pensions and HM Revenue & Customs about the precise configuration of the data gateways to support the necessary movement of information to C-MEC are under way.”
Can the Minister give us an update on those discussions? I appreciate that due to commercial confidentiality there are limits to what he can say, but it is important to get it right. It is also important that members of the Committee are fully briefed as to the Minister’s intentions and what work has been undertaken in this area so far.
Amendment No. 115 touches on issues regarding what the rules will be as far as HMRC is concerned, and the sharing of income information from a non-resident parent with the parent with care. At the moment, HMRC quite properly has a duty of confidentiality to all taxpayers. Will that be the case going forward with its new role where the parent with care is concerned? It is a perfectly legitimate argument to say that the parent with care has an interest in having information about the non-resident parent’s income. That is particularly true given that the standard line at the moment from the CSA to parents with care in cases of suspected under-declaration of income to reduce maintenance is, “Go and find it out yourself. Be your own private detective.” Those are the sorts of conversations—perhaps not those exact words, but along those lines—that the CSA has with our constituents. Those issues are important and need to be teased out.
If I may make my final comments on the amendment. I recently met officials from EDS, a company that will be familiar to the Minister, as it is on the verge of being a wholly owned subsidiary of the Department—there is certainly a close working relationship between them, although there is nothing necessarily wrong with that. Some 3,000 of its staff work for the Department. In a recent letter to me, EDS said that
“until the Bill has received Royal Assent and the commission is established, it is unclear what system will be needed and who therefore might choose to bid for the contract (or contracts).”
That is legally correct. Of course, no one would expect EDS to say anything else, because there is legal form, but I would be incredulous, as would all Committee members, if detailed advance discussions were not held about the IT that we will need to make the system work. I am not asking the Minister to breach commercial confidentiality, but given that a range of Departments—not just the Minister’s—have a chequered history with large-scale IT contracts in recent years, I cannot overemphasise how fundamental that is to CMEC’s functioning smoothly and being the success that we all want it to be.

Paul Rowen: The hon. Gentleman has given a succinct review of the issues and concerns addressed by the amendment. I remind the Minister of the bold statement in the White Paper on the announcement of plans for the new child maintenance system:
“Using information from a single known source could significantly reduce the time it takes to make a maintenance calculation. For parents, this increases the prospect that they will receive child maintenance shortly after the initial application. For the body responsible for administering child maintenance, it offers the prospects of clearing initial applications much more swiftly, so that a backlog of applications does not build up.”
That is a laudable aim. The hon. Gentleman has asked—I hope that the Minister can give us a response—what will be done to the IT systems to allow that process to happen. At the moment, as he has pointed out, HMRC operates a number of IT systems that do not talk to each other. What steps is he taking to ensure that a single gateway will be operational as soon as the new arrangements are implemented, so that information can be transferred from HMRC about various income sources—whether tax credits, dividends or PAYE—to ensure an accurate assessment? If we do not have that assurance, the statement, although laudable, will end up like much else in the CSA in the past—something aimed for but never delivered.
My second point relates to the earlier argument about income data sharing. The Minister stated that the parent with care should provide evidence. Will he or HMRC permit the sharing of the non-resident parent’s income data with the parent with care, or with one of the information agencies advising and supporting them, to ensure that when an application or claim is made, it will not fall between the stools, and that the parent with care will be able to state clearly on the basis of information provided by HMRC that a reassessment needs to be made? That will give the parent with care much more confidence to pursue claims. Often the forms and paperwork are complicated and not intelligible to most people. If that information is revealed, it will make parents with care much more determined to pursue child maintenance, where the non-resident parent is clearly seeking to avoid it. I hope that the Minister will update us on those issues and ensure that there will be a workable gateway.
What work is HMRC doing to ensure that its systems respond to one another, which they do not currently do? Will the Minister ensure that the information transfers to the Department for Work and Pensions in a single stream? If that has to be done manually, as happens at present, a backlog will accumulate.
My second point is about HMRC sharing data, subject to certain privacy rules. When a child is involved, there is a clear case for making information available, so will the Minister ensure that HMRC makes data available to the parent with care to assist them in the pursuit of their claim?

James Plaskitt: Naturally, the discussion of the amendment strays into the question of IT, because it is crucial to ensure that that works. I am grateful to both the hon. Members for South-West Bedfordshire and for Rochdale for their comments on the matter. It is of course important that the connection works, and I shall attempt to give reassurances.
There is already a fair amount of data transfer between HMRC and the DWP and it works smoothly, particular in respect of information received from taxpayers who have completed their self-assessment PAYE forms. I also reassure the hon. Gentlemen that the discussions about evolving the system so that the necessary platforms are in place for the transfer of data envisaged under the commissioner arrangements are well advanced and have been ongoing for some time.
Of course, the Government seek the same reassurances as the hon. Gentlemen on the robustness of the system. It is our duty to lay down the specifications to ensure that there are no unnecessary barriers to prevent its working. The issue of who is contracted to do the job is an entirely separate issue on which I ought not comment. Contractors may have their views about that situation, but they would say that, would they not? We are clear about our obligations, the specifications and about ensuring that the system is there and that the data transfer required to make it work will function and run smoothly. All I should say at this point—this is a public sitting—is that the discussions are advanced.
We recognise the principle behind the amendment and agree that we ought to consider whether the commission should have a means of dealing with non-resident parents who intentionally deprive themselves of income to reduce their maintenance liability. However, we must consider the point at which it is most appropriate to take account of intentional deprivation. If the power were included in the main scheme, the commission would be required to decide whether an observed reduction was intentional or reasonable in the case of every non-resident parent whose income fell, which would cause significant delays in processing of cases.
Although the Secretary of State currently has powers to make such regulations and has done so for the 1993 scheme, the powers were not used for the 2000 scheme for the sake of simplicity. We believe that that remains the right approach. To introduce regulations to tackle the small number of non-resident parents who successfully deprive themselves of income into the main scheme would add unnecessary complication and additional delays to the process of finalising a maintenance calculation and ensuring the flow of money to children. If the powers were applied to the main scheme, we would risk creating considerable additional work for the commission by, in effect, casting doubt on the income information supplied by all non-resident parents. However, if we decide to take a power to treat non-resident parents as earning income when they intentionally deprive themselves of income, the variations regime is the right mechanism by which to deal with those rare and complicated cases.
We have a power to introduce grounds for a variation to cover intentional deprivation of income. Paragraph 9 of schedule 4 to the Bill will carry forward powers to estimate income when information relating to a non-resident parent’s income is believed to be inadequate or unreliable.

Tim Boswell: I was just wondering about circumstances in which the Inland Revenue may have a taxpayer under investigation because it feels that their income has been systematically under-reported. The amendment is mainly about the system for the automatic transfer of data. To put it simply, will there be powers for the Inland Revenue to tip off the Department in order to generate the examination of a variation of a maintenance order?

James Plaskitt: That matter will be dealt with by the annual settlement part of the regime, because the assessments will be based on the previous year’s tax liability. If Her Majesty’s Revenue and Customs were investigating someone and found that there had been an irregularity or underpayment of tax, it would recoup that by bills in subsequent years. There will be a carry-over from the tax assessment into the maintenance assessment by the mechanism of fixed-term maintenance agreements, which we envisage the commission operating based on the previous year’s tax data. There should always be automatic catch-up of any correction that HMRC is doing.

Tim Boswell: I am grateful to the Minister for elucidating that process, because I was not aware of it. Does he agree that there is huge sensitivity, which has been exemplified by constituency casework, about the build-up of arrears of maintenance? It occurs to me that if the Inland Revenue is looking for a substantial recovery of unpaid tax, the recovery of unpaid maintenance will equally be at issue. Will he give some consideration to the relative priority of those two claims in relation to whether the revenue will go to the children or elsewhere?

James Plaskitt: I do not want to get the two things tangled up too much. It is important to remember that moving to a system of annual awards based on gross income will automatically fold information that HMRC gains about income into the maintenance system. I do not want to over-complicate the system, because we have been there and know the problems that that creates. I think that the degree of automaticity between HMRC data and maintenance that we envisage in the new system will cover the hon. Gentleman’s concerns.
We are currently meeting stakeholders, including One Parent Families, to discuss the best way to deal with such cases and whether we can make such a power work in practice. We will also take advice from the new commission before coming forward with secondary legislation. Depending on the outcome of those discussions, we will use existing powers to make regulations to deal with cases in which non-resident parents intentionally deprive themselves of income as part of the variations regime. Having given what I hope are sufficient reassurances, I hope that the hon. Member for South-West Bedfordshire will withdraw the amendment.

Andrew Selous: As I have said, this is a probing amendment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Paul Rowen: I beg to move amendment No. 65, in schedule 4, page 63, leave out lines 23 to 27 and insert—
‘12% where the non-resident parent has one qualifying child;
16% where the non-resident parent has two qualifying children;
19% where the non-resident parent has three or more qualifying children.’.
Schedule 4 deals with the basic rate that a non-resident parent will pay from their gross weekly income.

It being One o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at Five o’clock.